OFG Bancorp in San Juan, Puerto Rico, will record a pretax loss of roughly $21 million after its sells all remaining nonperforming assets from its 2010 purchase of the failed Eurobank.
The $7.4 billion-asset OFG said in a press release Tuesday that it will sell loans, with an unpaid principal balance of $197 million, for $36.3 million. The Federal Deposit Insurance Corp. agreed to cover the first $20 million of losses as part of its loss-share agreement with OFG.
OFG said the sale will also include certain nonperforming commercial loans and real estate it gained from its 2012 purchase of Banco Bilbao Vizcaya Argentaria’s Puerto Rican operations, including loans with a $38 million unpaid principal balance, for $5.2 million in cash. Real estate with a book value of $9.2 million will be sold for another $1.7 million in cash.
“This transaction is in line with our strategy of reducing the bank's credit exposure in light of profound fiscal challenges and uncertainties regarding the economic prospects of Puerto Rico,” José Rafael Fernández, OFG’s vice chairman, president and chief executive, said in the release.
“Our track record shows such timely, prudent decisions have ensured OFG's growth and its commitment to maximize shareholder value,” he added. “At this point, the chance of any significant recovery on these loans is low. Rather than assume any additional expense or risk in the future, it makes more sense to sell them now. From an operating viewpoint, the third quarter is progressing as planned.”